The Department of Finance (DOF) said it is pushing for a simplified mining fiscal regime.
In a statement on Wednesday, the DOF said the revised proposal for the Rationalization of the Mining Fiscal Regime proposes to impose a four-tier, margin-based royalty ranging from 1.5 percent to 5 percent on income from mining operations outside of mineral reservations.
Under the current regime, mining obligations vary depending on the mining agreement, which can be undertaken via the Mineral Production Sharing Agreement and Financial or Technical Assistance Agreement.
"These mining agreements can be undertaken in several ways, resulting in a complex tax system and investor uncertainty," the DOF said.
It added that the proposal is an improved version of House Bill 8937.
It noted that compared to the eight-tier structure from HB 8937, a four-tier structure makes it simpler for investors and the Bureau of Internal Revenue (BIR) to compute the corresponding tax rates.
"Furthermore, the simplified DOF version will lessen incentives for the private sector to pursue aggressive accounting to avoid taxes," the DOF said.
The current mining fiscal regime only taxes mines operating within a mineral reservation.
A margin-based windfall profits tax rate ranging from 1.5 percent to 10 percent on income from mining operations is proposed in light of the sudden increases in the world prices of metal.
The DOF said Fiscal Policy and Monitoring Group Officer-in-Charge Undersecretary Karlo Fermin Adriano already discussed the proposal to various mining and civil society stakeholders from the Chamber of Mines of the Philippines (COMP), Bantay Kita, Philippine Nickel Industry Association, Philippine Extractive Industries Transparency Initiative, BIR, and National Tax Research Center last Feb. 29.
“This is just the first step. We can be a major player in this global economy in terms of mineral production. We just have to realize it with the right policies,” Adriano said.
Sought for comment, COMP Chairman Michael Toledo, however, expressed concern on the DOF proposal.
"We are consoled by the fact that the DOF has seen our viewpoint that the mining fiscal regime should be one that will encourage investments and promote competitiveness," Toledo said.
He said HB 8937 already addresses this need, adding that the bill features an eight-tier, margins-based royalty applied to income for those operating outside mineral reservations with increasing royalty rates at higher operating margins.
"However, the DOF compromise proposal that seeks to impose instead a 4-tier royalty rate ranging from 1.5% to 5% will result in an increase in Annual Effective Tax Rate (AETR) from 59.6% under House Bill 8937 to 60.6%," Toledo said.
Toledo said the AETR in HB 8937 is already higher than that of Indonesia, Chile, Peru, South Africa, and marginally higher than Canada.
"The DOF proposal, therefore, will make the mining tax structure even more uncompetitive," he said.
"We in the Chamber also propose a 4-bracket regime, but one that starts at 1%, which we submit would be relatively easy for BIR to implement without drastically affecting the competitiveness of the Philippines as a mining investment destination," Toledo added. By Anna Leah Gonzales
Article courtesy of the Philippine News Agency
